Brunei Darussalam - Foreign investment

In July 1983, the sultanate withdrew its investment portfolio of more
than
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$3 billion (about half of total investment) from agents of the British
crown, who traditionally had handled investment banking for Brunei. The
Brunei Investment Agency (BIA) was established in its place, charged
with managing a substantial portfolio of assets invested around the
world. The Sultan's younger brother, Prince Jefri, who was also
finance minister, was head of the BIA, and he set up a conglomerate,
Amedeo Development Corporation, to serve as a corporate umbrella for all
non-petroleum sector investments. However, in the midst of the Asian
financial crisis it in 1997 and 1998, Amedeo collapsed into bankruptcy,
to the shock of most observers, including the Sultan who found out when
he was forced to withdraw offers of aid he had made to other countries
to help them through the crisis. It was subsequently revealed that as
much as $28 billion of public investment funds had been misallocated and
lost. Over 200 creditors brought suits, and charges were brought against
Prince Jefri, who was removed from his offices and went into exile in
London, and 71 others, including Prince Jefri's son, Prince
Hakeem, who was suspected of having received over $1 billion. The Amedeo
scandal shut off most foreign investment in Brunei in 1999 and 2000. In
2000, in a bid to become an offshore international banking center, the
government established the Brunei International Financial Center, but it
was not under August 2002 that the first international bank, the Royal
Bank of Canada, registered under this legislation. A report issued by
the United Nations Conference on Trade and Development (UNCTAD) in 2001
ranked Brunei 128th out of 140 countries surveyed in terms of
attractiveness to outside investors, measured as the size of foreign
investments relative to the size of the economy (apparently not
counting, however, Brunei's 50–50 joint venture
arrangement with Royal Dutch/Shell in the country's near
monopolistic oil company, Brunei Shell Petroleum (BSP), as involving
foreign investment). By 2001, however, the government had reached some
closure with the Amedeo matter and had taken some determined steps to
make Brunei a more attractive environment for outside investment.

In January 2001, the Sultan issued two decrees, Investment Incentive
Order 2001 and Income Tax (As Amended) Order 2001, that contained
reforms designed to attract business. The first made application for tax
incentives simpler for corporations, and the second broadened the tax
incentives. Also in January 2001, the government took two steps that
laid the basis for opening the oil and gas sector to increased foreign
participation. First, it announced the creation of a new wholly
government-owned national oil company, Brunei National Petroleum Company
Sendirian Berhad (Petroleum BRUNEI), which would have dual functions as
a regulatory agency and a commercial entity. Second, it announced that
its mode of operation in the oil and gas sector would henceforth be
though Production Sharing Contracts (PSCs) in place of the former
concession system. Both steps pointed to greater opportunities for
foreign oil countries, particularly given that two of Royal Dutch
Shell's concessions are set to expire in 2003.

In late 2001, the government added $1 billion to investment funds
available for projects under its eighth National Development Plan. In
2002, earnings from Brunei's investments abroad for the first
time exceeded its earnings from exports from its oil and gas sector. In
2002, the first exploration rights in deep-sea parcels in
Brunei's Exclusive Economic Zone (EEZ) were awarded under the PSC
regime.